USD Retreats Yet Is About To End The Week Higher

Sep 10 21, 10:03 GMT

The US dollar retreated against a number of its counterparts yesterday yet seems about to end the week higher after two consecutive weeks of losses. It should be noted that the week begun with widespread worries for the possibility that the Fed may delay the tapering of its QE program after a weak NFP figure being released for August, yet since then a number of Fed officials have suggested that a taper is still possible this year. It’s characteristic that Fed Governor Bowman stated yesterday that the weak August labor report won’t throw the central bank off course. On the other hand, US stock markets ended the day rather mixed with little gains as the US weekly initial jobless claims figure came out lower than expected spurring hope among investors yet worries for the possible adverse effect of the Delta variant were still present. It should be noted that US President Biden yesterday stated that he will order additional vaccinations and targeted the anti-vaccine movement while it should be noted that he also had a call with Chinese leader Xi Jinping in an effort to deescalate tensions in the US-Sino relationships which could create some safe haven outflows. Today we may see traders turning their attention to the US PPI rates while US fundamentals could also affect USD.

The USD Index dropped yesterday stabilizing between the 92.75 (R1) resistance line and the 92.30 (S1) support line. We tend to expect a sideways motion currently, given that the RSI indicator below our 4-hour chart run along the reading of 50, implying a rather indecisive market, yet fundamentals may alter the index’s path to either direction. Should a selling interest be displayed by the market we may see the Index breaking the 92.30 (S1) support line and aim for the 91.75 (S2) support level. Should buyers be in charge, we may see the index breaking the 92.75 (R1) resistance line and aim for the 93.20 (R2) resistance level.

CAD could fluctuate from August’s employment data

The Loonie strengthened against the USD yesterday and during todays’ Asian session as the expectation of BoC tapering its QE program in October remained intact and today’s employment data for August, are expected to be closely watched by CAD traders. The employment change figure is expected to rise, while the unemployment rate is expected to retreat and if so, could provide some support for the Canadian currency as it would be a clear indication for further tightening of the Canadian employment market which could boost the confidence of BoC. It should be noted that BoC Governor Macklem yesterday stated that the bank plans to raise the key rate before winding down its bond buying program spurring hopes for an earlier tightening of the banks’ monetary policy. On the other hand, oil prices were clipped as China seems about to release state oil reserves to reduce pressure on domestic refiners and if so could weaken demand for oil.

USD/CAD dropped yesterday yet seems to remain playful with the 1.2650 (R1) level. We end to maintain a bias for a sideways movement for now given that the RSI indicator below our 4-hour chart is near the reading of 50, yet we also note the bearish tendencies for the pair. Should the bears actually take over, we may see the pair aiming if not breaking the 1.2495 (S1) support line. Should the bulls take over we may see the pair breaking the 1.2650 (R1) resistance line and take aim if no break the 1.2785 (R2) level.

Other economic highlights today and the following Asian session:

Today during the European session, we highlight UK’s GDP rate and manufacturing output growth rate, both for July while from Germany we get final HICP rate for August. On the monetary front we note Lagarde’s participation in the Eurogroup meeting after yesterday’s ECB interest rate decision to remain on hold. In the American session, we get Canada’s employment data for August and from the US the PPI rates for August, while oil traders may be more interested in the release of the Baker Hughes weekly oil rig count. On Monday’s Asian session we note Japan’s Corporate Goods prices for August.

USD Index H4 Chart